Customer Experience Management: A Revolutionary Approach to Connecting with Your Customers

By Bernd H. Schmitt

In Customer Experience Management, renowned consultant and marketing thinker Bernd Schmitt follows up on his groundbreaking book Experiential Marketing by introducing a new and visionary approach to marketing called customer experience management (CEM). In this book, Schmitt demonstrates how to put his CEM framework to work in any organization to spur growth, increase revenues, and transform the image of your company and its brands. From retail buying to telephone orders, from marketing communications to online shopping, every customer touch-point offers companies an opportunity to maximize the customer experience and establish a bond that will never be broken.

Customer Experience Management introduces the five-step CEM process, a comprehensive tool for connecting with customers at every touch-point. This revolutionary marketing guide provides cases of successful CEM implementations in a wide variety of consumer and B2B industries, including pharmaceuticals, electronics, beauty and cosmetics, telecommunications, beverages, financial services, and even the nonprofit sector.

A must-read for senior executives, marketing managers, and anyone who wants to drive growth, increase income, and spur organizational change, Customer Experience Management demonstrates the power of collecting truly relevant customer information, developing and implementing winning strategies, and measuring their results.

• Language: English
• Publisher: Wiley
• Release date: Jul 9, 2010
• ISBN: 9780471473978

Book preview

CHAPTER 1

Taking the Customer Seriously—Finally

Companies of all kinds acknowledge that their customers are important; that customers are the company’s most valuable asset; that the company survives only when it has customers and grows only when it can retain them and recruit new ones; and that the company, therefore, should be structured and managed around the customer.

You have heard such proclamations many times—in CEO speeches, in press releases, and in the phone queue waiting for a customer service representative. In a survey that I conducted in 2002 at Columbia Business School with more than a hundred U.S. managers, customer focus was identified as the single most important differentiator between the best and worst companies in an industry.

But what about customers’ actual experiences? How are customers really being treated? The answer is badly, despite all the protestations to the contrary. Customers are still being treated as if they didn’t matter or as if they were an afterthought to the company’s really important concerns. Take a look at these situations:

• You are a loyal and valuable airline customer. You spend more than 70 days per year up in the skies, usually in international travel, in first or business class on 747s. You are now about to cash in on the rewards of your loyalty: You are booking a vacation for you and your family with those carefully accumulated frequent flyer miles. How does your favorite airline treat you now? Is your trip an occasion for the airline to celebrate your loyalty? Are you a key priority, a valuable asset on that special ticket ? Not likely. For many airlines, you are the lowest priority because you are not a revenue-generating passenger on that particular trip. You are a sucker, a parasite. And you will be treated accordingly: filling out forms to get the ticket, waiting on low-priority reservation lines, paying extra to get your tickets delivered. You are not eligible for upgrades. You get lowest priority on standby lists. If anything goes wrong during the trip—such as a cancellation due to bad weather or problems with the aircraft—you are the last to be informed and the last to have your problems resolved. So much for being a loyal, valuable customer all those years.

• You go to a local fast-food restaurant. The restaurant is dirty. The restrooms are filthy. The whole place smells of grease. The service people behind the counter manage to take your order, give you change, and fill up your tray without looking at you once. The seats are screwed into the walls so far from the tables that you can barely reach your food. Sure, the food was cheap—but do you deserve this kind of treatment?

• You hear about a new online pet-food store and think, hey, that would be better than dragging home 40-pound bags of dog chow. You get onto the site, find your way around it—which is not easy—and manage to checkout using your credit card. At 7:30 the next morning, you get a call from a customer service representative who says their e-commerce software has failed to capture your credit card information and could you please give it to her again. She’s pretty sure they have the rest of the order information correct. In the cold light of morning, you think twice about entrusting your credit card information to a company with such unreliable software, and you tell the caller to cancel the order. The next day you get another call from a different customer service person, asking you again for your credit card information. You repeat your cancellation. Two days later, it happens again, and not one of these three customer service people realizes that either of the others has called. You finally manage to cancel the order, but you still cannot get off their newsletter e-mailing list because the unsubscribe function doesn’t work.

• You run your own business, a management consulting firm, but it is difficult to do business with most of your vendors (IT service providers, graphic design firms, messenger services, etc.). In this age of the Internet, you still have to pick up the phone and fill out paper invoices to order their goods and services. Some of the vendors keep you on a phone line waiting for service for extended periods. Some vendors cannot e-mail order confirmations. Can’t these suppliers improve the way they serve your business?

All of these bad experiences—and many, many more—have happened to me over the course of writing this book. I am the guy who buys the yogurt with the bad packaging and spills it all over his suit. I am the one waiting 25 minutes on hold for customer service or standing around at the counter while the salesperson chats on the phone. I am the guy under the desk trying to connect the peripheral device in a forest of cords that all look exactly alike.

Unless I am particularly unlucky, you probably have similar stories to report. If you browse any of the complaint Web sites on the Internet, you will find thousands of such stories from dissatisfied customers.

The bad treatment many customers receive is not just a matter of the incidental failure of a particular aspect of customer management. It is not just that the Web site is poorly set up, or that the person at the call center had a bad day, or that this particular model of the product has a glitch. These failures are symptomatic of broader problems in the organization. Despite their insistence about the key importance of the customer, many companies are still systematically failing to provide their customers with positive experiences.

In fact, the problem is not just with a few companies here and there; entire industries seem to have caught the disease of customer mismanagement and abuse: car dealers, insurance companies, and electronics retailers are on the list of customer abusers for many people. Life as a customer can be really tough; sometimes it may seem as if you just have to live with inferior goods and poor service: C’est la vie!

FIGURE 1.1

Frustrating customer situations: opening a badly designed yogurt container, waiting on the phone for customer service, connecting computer peripherals, trying to open alarm clock packaging. Credit: Photos by Nick Peterson.

002

But wait. Even in the most customer-unfriendly industries, I can usually find at least one good—if not splendid—company that exemplifies the provision of outstanding customer experiences. Poor treatment of customers does not have to be a way of life. The examples discussed next come from the same industries as those presented earlier, but they illustrate very different treatment of customers:

• Singapore Airlines focuses on delivering an extraordinary experience—a great way to fly—through outstanding service. In its annual report, the company states: Our aim is to provide the highest standards of service in the aviation industry; it focuses on all aspects of the travel experience in whatever class of service. In the course of my consulting and speaking engagements, I have spoken with hundreds of executives who have flown Singapore Airlines and almost all of them have been full of praise. The company has thought through every step of the customer experience, even in economy class: a friendly and competent reservation agent serves customers making reservations; the check-in procedure is fast and efficient; a flight attendant with a warm and natural smile greets passengers entering the plane; one of the attendants walks each passenger to his or her seat; at the seat, there is an amenities box; during the trip, the flight attendants are attentive; and so on and on. You can only imagine what executives report about business and first class. This airline has been an innovator in managing their customers’ experience over the years: They were the first to have sleeper seats, dozens of channels in economy class, Internet booking for international reservations, and many other breakthroughs.

• For a great fast-food experience, go to Starbucks. Of course, it’s not called fast food. In fact, the service may even be a little slow. That is all part of the experience. There is much more to feel and experience in Starbucks than in the typical fast-food dump. This Third Space between home and office, as the company’s CEO has described its positioning platform, strives to provide an outstanding customer experience.

• How about online ordering? In contrast to my bad experience with the pet-food site, Amazon.com provides a marvelous online shopping experience. The site has the right look and feel, as well as an amazing interface. What is more, Amazon.com is continuously improving on the experience. We will take a closer look at this successful and innovative company in Chapter 7.

• For sending packages and other shipments from business to business, Federal Express (FedEx) has developed convenient Web-based shipping tools that get the job done fast and easily via the Internet right from your desktop. Or you can also give your front office employees the power to ship, track, and handle reports from their personal computers (PCs). There is more: Through FedEx, you can buy or lease a PC, handle all invoicing electronically, and track the shipment at any time.

FIGURE 1.2

Delightful customer situations: playing cards from Singapore Airlines, enjoying a Starbucks coffee, cruising on a Razor Scooter, relaxing with a cucumber eye mask. Credit: Photos by Nick Peterson.

003

There is hope for better customer experiences. The companies in these counterexamples achieved extraordinary customer care. I featured some of these companies in my earlier book Experiential Marketing, and I provide many more outstanding examples throughout this book. These companies serve as benchmarks for a successful focus on the customer experience.

If all of this sounds supremely sensible, why are most companies doing such a bad job? If Singapore Airlines, Starbucks, Amazon.com, Federal Express, and others can succeed, why can’t more companies take the customer experience more seriously? And why, despite all their public declarations, are most companies still unable to treat customers the way they deserve to be treated? Are these companies just cynical? Is all that your call is important to us and be assured your business is of great value to us just marketing talk?

Occasionally, perhaps, but not for the large majority of cases. The problem is that such companies have been relying on outdated and misguided marketing and management approaches that present themselves as customer-focused but fail to help companies connect with their customers.

Three Misguided Approaches: The Marketing Concept, Customer Satisfaction, and CRM

What approaches am I referring to? Many of the companies that talk about the importance of the customer rely on one of three paradigms: the marketing concept, customer satisfaction, or customer relationship management. In the following sections, I describe these paradigms and explain why I call them the devil in disguise.

The Marketing Concept

In the 1990s, companies increasingly acknowledged the critical importance of becoming customer-oriented and marketdriven instead of product-, technology-, or sales-focused. Becoming customer-oriented and market-driven is the core of what marketing scholars have called the marketing concept. This is how Philip Kotler, a well-known marketing author, summarizes the marketing concept:

The marketing concept holds that the key to achieving organizational goals consists of determining the needs and wants of target markets and delivering the desired satisfactions more effectively and efficiently than competitors. It starts with a well-defined market, focuses on customer needs, coordinates all the activities that will affect customers, and produces profits by satisfying customers.¹

Determining the needs and wants of target markets, delivering the desired satisfactions, focuses on customer needs, coordinates all the activities that will affect customers—it all sounds good, doesn’t it?

In fact, marketers have even developed a formal measure of the degree to which companies live the marketing concept. It is called the market orientation scale. The scale consists of 20 items that companies can use to diagnose the degree to which they are customer- and market-focused. The scale includes three subcomponents that form the backbone of the marketing concept:

1. Intelligence generation. The collection of information about customer needs and competition through market research.

2. Intelligence dissemination. The spreading of the collected information cross-functionally and organization-wide.

3. Responsiveness. Acting on the collected information to satisfy customers (e.g., by incorporating customer intelligence into new product development).

When managers take a close look at the concepts, models, and tools of the traditional marketing field, they soon realize that traditional marketing is not at all customer-oriented. As I showed in Experiential Marketing, the field of marketing is fundamentally engineering- and logistics-driven; instead of focusing on the customer, marketing remains product-focused and sales-oriented:

• Most concepts and tools focus narrowly on functional features and benefits of products; traditional marketing lacks concepts that can account for the image and imaginative qualities that a product may provide.

• Markets and competition are defined on the basis of similarities in features and benefits; as a result, a broader and more appropriate view of markets and competition (based on consumption and usage situations) is missing.

• Customers are seen simply as rational decision makers who trade off functional features and benefits in their minds, when in fact they frequently engage in emotion-, intuition-, and impulse-driven purchases.

• Market research is a purely analytical and a mostly verbal undertaking, and methods that study customers in their natural environments are seen as unreliable and invalid.

• Marketing strategy’s holy cow is differentiation, another product-focused concept. Differentiation of a consumer product does not guarantee that the product is relevant to a consumer’s life. Differentiation of an industrial good does not guarantee the good solves a business customer’s problems. Differentiation is just that—being different—and often in trivial aspects that are irrelevant to the customer.

• Marketing implementations through the Four P’s (product, price, promotion, and place) consist of a product-centered to-do list that specifies that the product needs to be packaged, priced, advertised, and distributed; but where is the C (the customer) in the Four P’s? How many product design, pricing, promotion, and distribution decisions actually focus on the customer?

• The marketing orientation scale is information-focused and quite generic. It can be useful as a broad assessment tool, but not for strategizing or planning a customer-oriented initiative. Empirically, the scale is only weakly correlated with organizational success. What is most confusing about the marketing concept is that it presents product-focused concepts and methods in the guise of a customer-oriented approach. As a result, if you rely exclusively on this concept and its methodologies, you are unlikely to fully understand your customers.

Customer Satisfaction

Another approach that presents itself as customer-focused—but isn’t—is customer satisfaction. We all believe that customer satisfaction creates customer loyalty; therefore, the objective of this approach is to ensure that customers are satisfied after they have purchased a product or otherwise interacted with the company.

When are customers actually satisfied? According to this model, satisfaction is an outcome-oriented attitude deriving from customers who compare the performance of the product with their expectations of it. If the product is below customers’ expectations, they will be dissatisfied; if it is above expectations, customers will be satisfied.

Here we go again. In the customer satisfaction framework, expectations and performance are viewed in purely functional, product-driven terms. What does the customer expect in terms of product functions? What does he or she expect to get out of the product? How did the performance of the product (e.g., its quality) stack up?

What is absent from this approach is a consideration of all the experiential dimensions of product consumption that matter to customers. These dimensions may include how the product (or service) makes customers feel, what emotional associations they may have with it, and how the product or service may help customers relate to other people or groups of people. A whole world of experiential connections is waiting to be explored, and traditional customer satisfaction fails to take